JP Ltd manufacturers of a special product, follows the policy of EOQ for one of its components. The component’s details are as follows:

The company has been offered a discount of 2% on the price of the component provided the lot size is 2,000 components at a time.

a. Compute the EOQ

b. Advise whether the quantity discount offer can be accepted [Assume that the inventory carrying cost does not vary according to discount policy.]

c. Would your advice differ if the company is offered 5% discount on a single order?

Transcribed Image Text:

Purchase price per component Cost of an order Annual cost of carrying unit in inventory Total cost of inventory and ordering per annum Rs. 200 100 10% of purchase price 4,000